NewChinese equity markets may see limited fallout from Fed lift-off
Rate rise may inspire some nervous trading, but move by Yellen already telegraphed
Hong Kong and mainland Chinese stocks may feel some pressure if the US Fed raises its short-term interest rates on Wednesday for the first time in nearly a decade, but the fallout may be limited as markets have largely built in a 25-basis-point rate increase into pricing, analysts say.
Expectations of a Fed lift-off in December have caused Hong Kong and Chinese stocks to trade cautiously lower in the past two weeks.
Hong Kong’s Hang Seng Index has fallen 2.4 per cent by Friday since the start of the month, and mainland China’s Shanghai Composite Index has slipped 0.3 per cent.
Trading volumes also shrank, as the risk-off sentiment took firm hold ahead of the rate decision. The average daily turnover in Hong Kong dropped to HK$72 billion for the past nine sessions since December 1, compared with November’s average figure of HK$75 billion, and largely below an expected daily average of HK$108 billion for 2015, according to an estimation by Credit Suisse.
“Hong Kong investors are cautiously watching the Fed’s December policy meeting, as the rate increase is clearly in order,” said Alex Kwok, an analyst from China Investment Securities.
Fed Fund futures on Thursday suggested an 83 per cent probability of a December rate increase by 25 basis points, according to CME Group.